Category: Timely Opportunities
Great news! Your company has been approved for the Payroll Protection Program (PPP) loan. Now what? For some companies, this may be the first time you’ve taken out a loan. And, since you expect to have expenses that qualify for the loan to be forgiven in whole or in part, you may be wondering if you really have to account for this as a loan on your books.
Currently, there is no specific guidance under generally accepted accounting principles in the United States (GAAP) that addresses how to account for a forgivable loan from a governmental entity. While we expect that clarifying guidance will be forthcoming, we believe that the PPP loans should be accounted for as a debt instrument in accordance with GAAP. Following are some of the key elements in accounting for debt:
The COVID-19 pandemic has created many challenges in all aspects of our daily lives. While accounting for the PPP funding that your business receives may not be at the top of the list, it is something that you’ll want to make sure to consider so that when the 8-week forgiveness period comes to an end and you apply for the loan forgiveness, you can feel confident that you have the proper documentation.
From a GAAP financial reporting standpoint, whenever there is a lack of clear guidance or a diversity in practice, we expect clarifying guidance to be issued. So, while some aspects may be unclear now, we are hopeful that answers will be provided soon.
To discuss how to account for your PPP loan, contact your Kerkering Barberio team member at (941) 365-4617 or visit our website at https://www.kbgrp.com/resources/covid-19-updates.